Exhibit
10.2


 


CHANGE OF
CONTROL AGREEMENT


 


THIS AGREEMENT, is made and entered into as of this
25th day of August 2008, by and between Arctic Cat, Inc. (the “Company”)
and Claude J. Jordan (the “Executive”).


 


 WHEREAS, the Company
considers the establishment and maintenance of a sound and vital management to
be essential to protecting and enhancing the best interests of the Company and
its shareholders; and


 


WHEREAS, Executive has made and is expected to make, due to
Executive’s intimate knowledge of the business and affairs of the Company, its
policies, methods, personnel and problems, a significant contribution to the
profitability, growth and financial strength of the Company; and


 


WHEREAS, the Company recognizes that the possibility of a
Change in Control may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure of
Executive or distraction in the performance of Executive’s duties to the
detriment of the Company and its shareholders; and


 


WHEREAS, Executive is willing to remain in the employ of the
Company upon the understanding that the Company will provide income security if
Executive’s employment is terminated under certain terms and conditions;


 


WHEREAS, it is in the best interests of the Company and its
shareholders to reinforce and encourage the continued attention and dedication
of management personnel, including Executive, to their assigned duties without
distraction and to ensure the continued availability to the Company of
Executive in the event of a Change in Control; and


 


WHEREAS, the Company and Executive acknowledge that they have
signed an Employment Agreement of even date herewith, and that this Agreement
shall supersede such Employment Agreement with respect to termination upon a
Change of Control as defined herein and any compensation paid to Executive upon
such termination.


 


THEREFORE, in consideration of the foregoing and other
respective covenants and agreements of the parties herein contained, the
parties hereto agree as follows:


 


1.             Term
of Agreement. The term of this Agreement shall commence on the date of this
Agreement, and shall continue in effect through December 31, 2009, and
shall automatically be extended for successive one-year periods thereafter
unless the Board of Directors of the Company (“the “Board”) shall have
determined, and Executive is notified in writing, prior to December 31,
2008 and each December 31 thereafter, that the term of this Agreement
shall not be extended or further extended from such date; provided, however,
that if a Change in Control shall have occurred during the original or any
extended term of this Agreement, this Agreement shall continue in effect for a
period of 36 months from the date the occurrence of a Change in Control or, if
an event triggering the Company’s severance payment obligations to Executive
under Section 4(d) has occurred during such 36-month period, this
Agreement shall continue in effect until the benefits payable to Executive
hereunder have been paid in full.  In the
event that more than one Change in Control shall occur during the original or
any extended term of this Agreement, the 36-month period shall follow the last
Change in Control.  This Agreement shall
neither impose nor confer any further rights or obligations on the Company or
Executive on the day after the end of the term of this Agreement.


 


2.             Change
in Control. No benefits shall be payable hereunder unless there shall have
been a Change in Control, as set forth below.


 


For purposes of this Agreement, a “Change in Control” of the Company
shall mean any of the following events:


 


(i)            if any “person” (as
such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of 


 


 


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the Company
representing 20% or more of the combined voting power of the Company’s then
outstanding securities, provided, however, it shall not be deemed
a Change in Control if such person becomes the beneficial owner of 20% or more
of the combined voting power as a result of an issuance of stock by the Company
which issuance has been approved by the Incumbent Directors (as defined below)
in response to an Unfriendly Change in Control (as defined in Section 5)
and provided further, however, that no Change in Control shall be
deemed to have occurred pursuant to this Section 2(i) as a result of
Suzuki Motor Corporation’s (“Suzuki”) ownership of more than 20% of the
combined voting power of the Company’s outstanding securities unless and until
such time as Suzuki owns more than 40% of the combined voting power of the
Company’s outstanding securities;


 


(ii)           if the Incumbent
Directors cease for any reason to constitute at least a 75% of the Board.  The term “Incumbent Directors” shall mean
those individuals who are members of the Board on the effective date of this
Agreement and any individual who subsequently becomes a member of the Board
(other than a director designated by a person who has entered into agreement
with the Company to effect a transaction contemplated by Section 2(iii))  whose election or nomination for election by
the Company’s shareholders was approved by a vote of at least 75% of the then
Incumbent Directors; or


 


(iii)          (A) the
Company consummates a merger, consolidation, share exchange, division or other
reorganization of the Company with any corporation or entity, other than an
entity owned at least 80% by the Company, unless immediately after such
transaction, the shareholders of the Company, other than Suzuki, immediately
prior to such transaction beneficially own, directly or indirectly 51% or more
of the combined voting power of resulting entity=s outstanding voting securities as well
as 51% or more of the Total Market Value of the resulting entity, or in the
case of a division, 51% or more of the combined voting power of the outstanding
voting securities of each entity resulting from the division as well as 51% or
more of the Total Market Value of each such entity, in each case in
substantially the same proportion as such shareholders owned shares of the
Company prior to such transaction; (B) the shareholders of the Company
approve an agreement for the sale or disposition (in one transaction or a
series of transactions) of assets of the Company, the total consideration of
which is greater than 51% of the Total Market Value of the Company, or (C) the
Company adopts a plan of complete liquidation or winding-up of the
Company.  ATotal Market Value@ shall mean the aggregate market value of
the Company=s or the resulting entity=s outstanding capital stock (on a fully
diluted basis) plus the aggregate market value of the Company=s or the resulting entity=s other outstanding equity securities as
measured by the exchange rate of the transaction or by such other method as the
Board determines where there is not a readily ascertainable exchange rate; or


 


(iv)          if a change in
control otherwise occurs which would be required to be reported in response to
the current Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Exchange Act, whether or not the Company is then subject to such reporting
requirement.


 


3.             Termination
Following Change in Control. If a Change in Control shall have occurred and
Executive is thereafter terminated while this Agreement is in effect, Executive
shall be entitled to the benefits provided in subsection 4(d) unless such
termination is (A) because of Executive’s death, (B) by the Company
for Cause or Disability, or (C) by Executive other than for Good Reason.


 


(a)           Disability.  For purposes of this Agreement, the term “Disability”
shall have two different meanings.  For
purposes of benefits due under any Company-sponsored disability insurance
policy (whether short-term, long-term, or any applicable salary continuation
policy provided during any elimination period), the definition of Disability
shall conform to the definition provided in such policy.   For purposes of any payment made to
Executive in excess of the benefits due under any such Company-sponsored
disability insurance policy, the definition of Disability shall be at least as
restrictive as the applicable definition provided in Code Section 409A.  The Executive’s employment shall terminate
upon the Disability of the Executive unless waived by the Company, where the
definition of Disability shall conform to the definition of disability set
forth in any Company-sponsored disability insurance policy.


 


 


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(b)           Cause.  For purposes of this Agreement, the Company
shall have the right to immediately terminate the employment of Executive for “Cause”
if the Executive shall:


 


(i)            Willfully or
materially breach this Agreement or continually fail to perform the duties that
the Executive is required to perform under the terms of this Agreement;


 


(ii)           Willfully violate
other reasonable and substantial rules governing Executive performance,
including, without limitation, prohibitions against unauthorized use of drugs
or alcohol without treatment;


 


(iii)          Violate or
willfully refuse to obey  reasonable
instructions of the Chief Executive Officer and/or the Board of Directors, provided that such instructions are not in violation of this
Agreement;


 


(iv)          Willfully engage in
conduct that is demonstrably and materially injurious to the Company,
monetarily or otherwise;


 


(v)           In the performance
of Executive’s duties under this Agreement, engage in any act of misconduct,
including misconduct involving moral turpitude, which is injurious to the
Company; or


 


(vi)          Be convicted of or
plead guilty to any criminal charge or indictment, the nature of which the
Company determines, in its sole discretion, has a detrimental impact on the
general reputation of the Company.


 


An act or failure to act is considered “willful” if done or not done
with an absence of good faith and without a reasonable belief that the act or
failure to act was in the best interests of the Company. In the event of
termination for “Cause”, Executive shall not be entitled to any severance
payments or any other payments under this Agreement. Executive shall not be
terminated for Cause unless and until the Company shall have delivered to
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice to
Executive and an opportunity for Executive, together with Executive’s counsel,
to be heard before the Board), finding that, in the good faith opinion of the
Board, Executive’s conduct was Cause and specifying the particulars thereof in
detail.


 


(c)           Good Reason.
Executive shall be entitled to terminate his or her employment for Good Reason
following a Change in Control, and in such case shall be entitled to the
benefits provided in subsection 4(d) of this Agreement. For purposes of
this Agreement, “Good Reason” shall mean, without Executive’s express written
consent, any of the following:


 


(i)            the authority,
powers, functions, responsibilities or duties assigned to Executive, as
compared to those in effect immediately prior to the Change in Control, are
materially and adversely diminished (except for any diminution that occurs
solely as a result of the fact that the Company ceases to be a public company);


 


(ii)           a reduction by the
Company in Executive’s annual base salary in effect immediately prior to a
Change in Control;


 


(iii)          the relocation of
the Company’s principal executive offices to a location more than twenty-five
miles from Thief River Falls, Minnesota, or from Minneapolis/St. Paul,
Minnesota or the Company requiring Executive to be based anywhere other than
the Company’s principal executive offices except for requiring travel on the
Company’s business to an extent substantially consistent with Executive’s
business travel obligations prior to the Change in Control;


 


(iv)          the failure by the
Company to continue to provide Executive with benefits at least as favorable to
those enjoyed by Executive under any of the Company’s pension, life insurance,
medical, health and accident, disability, deferred compensation, incentive
awards, bonus, stock options, or savings plans in which Executive was
participating immediately prior to the Change in Control, the taking of any
action by the Company which would directly or indirectly 


 


 


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materially reduce
any of such benefits or deprive Executive of any material fringe benefit
enjoyed immediately prior to the Change in Control, or the failure by the
Company to provide Executive with the number of paid vacation or sick days to
which Executive is entitled immediately prior to the Change in Control,
provided, however, that the Company may amend any such plan or programs as long
as such amendments do not reduce any benefits to which Executive would be
entitled;


 


(v)           the failure of the
Company to obtain a satisfactory agreement from any successor to assume and
agree to perform this Agreement, as contemplated in Section 8;


 


(vi)          the taking of any
action by the Company that would materially adversely affect the physical
conditions existing at the time of the Change in Control in or under which
Executive performs his employment duties;


 


(vii)         any material breach
of this Agreement by the Company; or


 


(viii)        any
purported termination of Executive’s employment which is not made pursuant to a
Notice of Termination satisfying the requirements of this Agreement; for
purposes of this Agreement, no such purported termination shall be effective.


 


(d)           Notice of
Termination. Any purported termination of Executive’s employment by the
Company or by Executive shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 7. For purposes of
this Agreement, a “Notice of Termination” shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth a summary of the facts and circumstances claimed to provide a
basis for termination of Executive’s employment.


 


(e)           Date of
Termination. For purposes of this Agreement, “Date of Termination” shall
mean:


 


(i)            if Executive’s
employment is terminated for Disability as defined by any Company-sponsored
disability insurance policy, 30 days after Notice of Termination is given; and


 


(ii)           if Executive’s
employment is terminated pursuant to subsections (b) or (c) above or
for any other reason (other than death or Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
subsection (b) above shall not be less than 10 days, and in the case of a
termination pursuant to subsection (c) above shall not be less than 10 nor
more than 30 days, respectively, from the date such Notice of Termination is
given).


 


(f)            Dispute of
Termination. If, within 10 days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected); provided, that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, the Company shall continue to pay Executive full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary and a year-end bonus in an amount
at least equal to the year-end bonus paid with respect to the fiscal year
immediately preceding the Change in Control) and continue Executive as a
participant in all compensation, benefit and insurance plans in which Executive
was participating when the notice giving rise to the dispute was given, until
the dispute is finally resolved in accordance with this subsection. Amounts
paid under this subsection are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts under
this Agreement.


 


4.             Compensation
Upon Termination or During Disability. Following a Change in Control, upon
termination of Executive’s employment or during a period of Disability,
Executive shall be entitled to the following benefits:


 


(a)           During any period
that Executive fails to perform full-time duties with the Company as a result
of a Disability as defined by any Company-sponsored disability insurance
policy, the Company shall 


 


 


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pay Executive the
base salary of Executive at the rate in effect at the commencement of any such
period plus a pro rata portion of an amount equal to the year-end bonus paid to
Executive for the fiscal year immediately preceding the Change in Control in
accordance with the Company’s regular payroll practices, until such time as
Executive is determined to be eligible for long term disability benefits in
accordance with any Company-sponsored disability insurance policy then in
effect.


 


(b)           If Executive’s
employment shall be terminated by the Company for Cause or by Executive other
than for Good Reason or Disability, the Company shall pay to Executive his full
base salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given and the Company shall have no further obligation
to Executive under this Agreement, except with respect to any accrued benefits
to which Executive is entitled under any Company pension or welfare benefit
plan, insurance program or as may otherwise be required by law.


 


(c)           If Executive’s
employment shall be terminated by the Company or by Executive for Disability,
or by reason of death, the Company shall pay to Executive (or Executive’s
designated beneficiaries or estate, if no beneficiary is designated) any and
all benefits to which Executive is entitled under any Company-sponsored
insurance program then in effect within thirty (30) days of such Disability or
death.  Any payment made to Executive in
excess of those provided by any Company-sponsored disability insurance policy
shall be paid in accordance with the requirements of and subject to the
applicable definitions of Code Section 409A.


 


(d)           If Executive’s
employment by the Company shall be terminated (A) by the Company other
than for Cause or Disability or (B) by Executive for Good Reason, then
Executive shall be entitled to each of the benefits provided by (i), (ii), (iii) and
(iv) below, subject to the provisions of (v) and (vi) below.  All payments pursuant to this Section 4(d) shall
be paid six (6) months after the Date of Termination or over the course of
a specified period of time with respect to and as provided in subsection (iii);
provided that an amount of such payments
permitted by Section 409A of the Code, inclusive of Section 401(a)(17)
of the Code, shall be paid to Executive in equal portions over the course of
the first six (6) months after the Date of Termination in accordance with
the Company’s normal payroll practices.


 


(i)            the Company shall
pay Executive Executive’s full base salary through the Date of Termination at
the rate in effect at the time the Notice of Termination is given and any other
form or type of compensation otherwise payable for such period;


 


(ii)           in lieu of any
further salary payments for periods subsequent to the Date of Termination, the
Company shall pay as a severance payment (the “Severance Payment”) an amount
equal to 2.99 times the average of the annual compensation which was paid to
Executive by the Company (or any corporation (“Affiliate”) affiliated with the
Company within the meaning of section 1504 of the Internal Revenue Code of 1986
(the “Code”)) and included in Executive’s gross income for Federal income tax
purposes for the five calendar years (or, if Executive has been employed by the
Company for less than five, the number of complete calendar years of
employment) (the “Base Period”) preceding the earlier of the calendar year in
which a Change in Control of the Company occurred or the calendar year of the
Date of Termination. Such average shall be determined in accordance with
regulations promulgated under section 280G(d) of the Code. Compensation
paid to Executive by the Company (or an Affiliate) shall include every type and
form of compensation included in Executive’s gross income in respect of
Executive’s employment by the Company (or an Affiliate), including compensation
income recognized as a result of the exercise of stock options or sale of the
stock so acquired, except to the extent otherwise provided in regulations
promulgated under section 280G(d) of the Code.


 


(iii)          For a 36 month
period after the Date of Termination, the Company shall arrange to provide
Executive with life, disability, accident and health insurance benefits
substantially similar to those which Executive is receiving or entitled to
receive immediately prior to the Notice of Termination.  Executive shall be responsible for the
payment of his or her portion of the premiums for such benefits (recognizing
that Executive shall remain responsible for payment of the same relative
percentage of total premiums as Executive paid prior to the Date of
Termination). Benefits otherwise receivable by Executive pursuant to this
paragraph (iii) shall be reduced to the extent comparable benefits are
actually received by Executive during such 36 


 


 


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month period, and
any such benefits actually received by Executive shall be reported to the
Company.


 


(iv)          Except to the extent
such payment would constitute a “parachute payment” within the meaning of Section 280G(b)(2) of
the Code as determined under subsection (d)(v) hereof, the Company shall
also pay to Executive all legal fees and expenses incurred by Executive in the
event Executive has a bona fide claim for wrongful termination (including all
such fees and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit provided by
this Agreement).


 


(v)           The Severance
Payment shall be reduced by the value of benefits actually provided in (iii) above
and by the amount of any other payment or the value of any benefit received or
to be received by Executive in connection with the termination of employment or
contingent upon a Change in Control of the Company (whether payable pursuant to
the terms of this Agreement, any other plan, agreement or arrangement with the
Company or an Affiliate) unless (1) Executive shall have effectively
waived receipt or enjoyment of such payment or benefit prior to the date of
payment of the Severance Payment, (2) in the opinion of tax counsel
selected by the Company and acceptable to Executive, such other payment or
benefit does not constitute a “parachute payment” within the meaning of section
280G(b)(2) of the Code, or (3) in the opinion of such tax counsel,
the Severance Payment (in its full amount or as partially reduced, as the case
may be) plus all other payments or benefits which constitute “parachute
payments” within the meaning of section 280G(b)(2) of the Code are
reasonable compensation for services actually rendered, within the meaning of
section 280G(b)(4) of the Code, and such payments are deductible by the
Company. The value of any non-cash benefit or any deferred cash payment shall
be determined by the Company in accordance with the principles of sections
280G(d)(3) and (4) of the Code.


 


(vi)          If it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of Executive and the Company in
applying the terms of this Subsection 4(d), the aggregate “parachute payments”
paid to or for Executive’s benefit are in an amount that would result in any
portion of such “parachute payments” not being deductible by the Company or its
Affiliates by reason of section 280G of the Code, then Executive shall have an
obligation to pay the Company upon demand an amount equal to the sum of (1) the
excess of the aggregate “parachute payments” paid to or for Executive’s benefit
over the aggregate “parachute payments” that would have been paid to or for
Executive’s benefit without any portion of such “parachute payments” not being
deductible by reason of section 280G of the Code; and (2) interest on the
amount set forth in clause (1) of this sentence at the applicable Federal
rate (as defined in section 1274(d) of the Code) from the date of
Executive’s receipt of such excess until the date of such payment.


 


(e)           Executive shall not
be required to mitigate the amount of any payment provided for in this Section 4
by seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Section 4 be reduced by any compensation
earned by Executive as the result of employment by another employer or by
retirement benefits after the Date of Termination, or otherwise except as
specifically provided in this Section 4.


 


5.             Funding
of Payments. In order to assure the performance by the Company or its
successor of its obligations under this Agreement, the Company may at any time
deposit in trust an amount equal to the maximum payment that will be due
Executive under the terms hereof; provided, however, that the
Company shall deposit in trust the amount equal to the maximum payment due
Executive immediately upon an Unfriendly Change in Control.  Under a written trust instrument, the Trustee
shall be instructed to pay to Executive (or Executive’s legal representative,
as the case may be) the amount to which Executive shall be entitled under the
terms hereof, and the balance, if any, of the trust not so paid or reserved for
payment shall be repaid to the Company. If the Company deposits funds in trust,
payment shall be made by the Trustee to Executive in accordance with the
provisions of this Agreement.  If and to
the extent there are not amounts in trust sufficient to pay Executive under
this Agreement, the Company shall remain liable for any and all payments due to
Executive. In accordance with the terms of such trust, at all times during the
term of this Agreement, Executive shall have no rights, other than as an
unsecured general creditor of the Company, to any amounts held in trust and all
trust assets shall be general assets of the Company and 


 


 


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subject to the claims of creditors of the Company. For purposes of this
Agreement, the term “Unfriendly Change of Control” shall be a Change in Control
which has not been approved by a majority of the Incumbent Directors in office
immediately prior to the Change in Control.


 


6.             Successors;
Binding Agreement.


 


(a)           The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement.


 


(b)           This Agreement shall
inure to the benefit of and be enforceable by Executive’s personal or legal
representatives, successors, heirs and designated beneficiaries. If Executive
should die while any amount would still be payable to Executive hereunder if
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive’s designated beneficiaries, or, if there is no such designated
beneficiary, to Executive’s estate.


 


7.             Notice.
For the purpose of this Agreement, notices and all other communications
provided for shall be in writing and shall be deemed to have been duly given
when delivered or mailed by united States first class mail, postage pre-paid,
addressed to the last known residence address of Executive or in the case of
the Company, to its principal office to the attention of its then Chief
Executive Officer, with a copy to its Secretary, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.


 


8.             Compliance
with Code 409A. If and to the extent that any provision of this Agreement
is required to comply with Code Section 409A, the Company shall have the
authority, without the consent of the Executive to interpret and/or amend such
provision to maintain to the maximum extent practicable the original intent of
the applicable provision without violating the provisions of Code 409A.


 


9.             Miscellaneous.
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by
the parties. No waiver by either party hereto at any time of any breach by the
other party to this Agreement of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or similar time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Minnesota. The invalidity or
unenforceability or any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.


 


IN
WITNESS WHEREOF, the undersigned officer, on behalf of Arctic Cat Inc., and
Executive have hereunto set their hands as of the date first above written.


 


 




	
   

  	
  ARCTIC CAT INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Its

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE

  






 


 


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